FIXING CALIFORNIA: WILL FRACKING BONANZA BE ALLOWED?

The state’s new law on fracking could clear the path for enormous economic growth

Seven years ago, the California unemployment rate was virtually the same as the national rate — under 5 percent. The Golden State had seen some downs during the broad economic growth enjoyed across America since the 1980s, especially after the end of the Cold War hollowed out the defense industry in the early 1990s. But by and large, California generally fared well for a generation, its economic health paralleling that of the U.S.

Now, in 2013, the state unemployment rate remains well above the nation’s for the fifth straight year — 8.9 percent in August vs. the U.S. rate of 7.3 percent. Using a joblessness measure that is based on those who want full-time work but can’t find it, California has the second-worst rate in the nation: 18.3 percent. Between elevated unemployment and the high cost of living, the Golden State now has the highest effective poverty rate of any state.

This explains why state leaders have for years spoken in a general sense about the urgent need to create good middle-class jobs. Nevertheless, Gov. Jerry Brown, Senate President Darrell Steinberg and Assembly Speaker John Pérez have not championed any initiatives or passed any legislation that offered broad hope of helping the state’s economy.

Until this month. On Sept. 20, the governor signed SB 4, a bill meant to comprehensively regulate hydraulic fracturing, better known as “fracking,” in energy exploration.

Fracking uses underground water cannons to blast away rocks blocking access to oil and natural gas reserves. It has been a staple of energy exploration for 60-plus years. In the past decade, however, energy companies have made the process vastly more efficient. They’ve come up with better formulas for the small amounts of chemicals added to the water cannons to loosen up rock formations; they’ve paired fracking with horizontal drilling techniques that enabled access to previously inaccessible reserves.

However, the most transformative change in hydraulic fracturing has come courtesy of the information-technology revolution. Energy explorers are now able to take the equivalent of massive MRIs of vast swaths of underground. This enables far more precise drilling.

SB 4 and related legislation mandate that permits be approved before fracking can be used and that the environmental effects of fracking, particularly on groundwater, be monitored.

Given that fracking has occurred for decades without any disaster remotely equivalent to Three Mile Island, oil companies had cause to criticize SB 4 as unnecessary regulation. Instead, their opposition was muted, reflecting their eagerness to get on with fracking in California.

That’s because fracking has the potential to vastly boost oil companies’ bottom lines while transforming California’s economy. The Golden State is home to enormous oil reserves in sedimentary rock formations thousands of feet below ground known as shale. The Monterey Shale formation, beneath the Central Valley and a coastal and offshore chunk of the Los Angeles Basin, contains more than 15 billion barrels of oil that can be accessed using fracking, according to a 2011 U.S. Energy Information Administration analysis. That’s nearly two-thirds of the total oil shale reserves in the entire nation.